China’s recent announcement of a $5-billion loan to the Democratic Republic of Congo to develop national infrastructure and mining interests seems to have taken the world by surprise.
International mining companies and institutions such as the World Bank, International Monetary Fund and African Development Bank have been scrambling to find out more details of the Chinese deal that might have severe repercussions on their own activities in the country.
China’s move, however, is far from unexpected. In fact it makes complete sense from a Chinese perspective. The DRC is one of the most mineral-rich countries in the world. It has an abundance of raw materials, such as copper, cobalt, diamonds, uranium, manganese and gold. Of these copper, uranium and manganese occupy top spots on China’s hit list of minerals that have strategic national value.
The loan repayment terms will be primarily in the form of mining concessions to Chinese companies.
China missed out on the first scramble for Africa and has had to settle on riskier environments to satisfy its voracious mineral appetite. It took only two years after the dust settled on Angola’s protracted civil war before Chinese oil companies were setting up shop in the country.
Further examples of China’s risk aversion include significant oil interests in Sudan and the recent purchase of a ferrochrome mining company in Zimbabwe.
What counts massively in China’s favour is the high-level diplomatic support that accompanies its mineral and energy investments in Africa. Having direct government backing helps to decrease the vulnerability of doing business with unstable regimes.
China has another ace up its sleeve that is unmatched by global mining companies. This is the huge infrastructural backing it can lend to countries such as the DRC.
Instead of benefiting from its enormous mineral wealth, the DRC has been racked by a 30-year-long civil war, leaving its economy in tatters and the country lagging near the bottom of the world’s poorest nations list.
A 2005 Organisation for Economic Cooperation and Development country report says 80% of the DRC’s population lives on less than $0,2 a day. Only 5,7% of the population have access to electricity and less than 5% of the country’s 57Â 700km road network is tarred. What mineral wealth the DRC has is being whisked out the country’s porous back doors.
Although only 1% of the country’s arable land is under cultivation, the agricultural sector was responsible for a staggering 50% of the country’s GDP in 2003.
As part of the loan agreement with China, $3billion will be allocated to infrastructural projects. These include a 3Â 400km highway, a 3Â 200km railway link with Matadi on the Atlantic Ocean, 31 hospitals, 145 health clinics and two universities. One has to wonder how much more favourable the global reaction would have been if it was the World Bank announcing these terms rather than China.
The other major value add from the Chinese perspective is that the Zambian Copperbelt cuts a swathe through the southeastern corner of the DRC. China has invested more in Zambia’s mineral resources than in any other African country. The Zambian Copperbelt is the location of China’s first special economic zone in Africa.
In addition, China’s proposed highway will link up to Zambia, which puts the DRC and its mineral reserves in easy grasp of the TanZam Railway to Dar es Salaam.
Despite institutional misgivings about all things Chinese in Africa, China’s forays into the DRC can only add value to a country that has been going nowhere slowly for three decades. In fact, it is hard to imagine a better lifeline coming from anywhere else.